Retailer Americanas scandal won’t affect Brazilian banks much: Central Bank

The Central Bank of Brazil said Thursday that the impact of the accounting scandal in which the retailer has been American SA on banks would be “negligible”, even in an extreme scenario.

The statement is in the minutes of last week’s Financial Stability Committee meeting, in which it was decided to maintain a neutral macroprudential policy due to the absence of a significant increase in financial risks.

Americanas filed for bankruptcy in January after disclosing “accounting inconsistencies” for a value of 20,000 million reais (3.840 million dollars), which led the banks to increase their provisions in their latest results release.

The central bank indicated that the provisions are derived from “a specific event related to a large company” and they have already absorbed most of the materialization of risk.

“The central bank estimated the remaining potential impact, plus a scenario of contagion to the entire production and supply chain that depends on the company in a relevant way,” he pointed.

“In this extreme scenario, the impact on the consolidated financial system is insignificant and there would be no capital default in any financial institution,” added.

The central bank also noted that “specific events in large companies” generated a deterioration in the prices of assets in the private bond market, with an increase in volatility, spreads and risk aversion, as well as an impact on some credit market lines.

His committee will continue to monitor the evolution of the situation and is prepared to act in case of dysfunction, he said.

In addition to American storesthe energy company Light revealed at the beginning of the year that it had hired a firm known for acting in bankruptcy protection, raising fears in this regard, which the company later denied.

Source: Reuters